How salary sacrifice changes your pay
Under salary sacrifice you give up some salary and your employer pays it into a pension. See why tax and National Insurance both fall.
This path is practice in how the records and the sums work. It is not tax advice. Any rate or allowance in a question is an example for that question, so check GOV.UK for the current figures.
Under salary sacrifice, an employee agrees to a lower salary. In return the employer pays the same amount into a benefit, most often the pension.
The contract is changed, so the lower figure is now the gross pay. Income tax and National Insurance are both worked out on the lower pay.
Compare a pension taken from pay before tax: there, National Insurance is still worked out on the full gross pay.
Sam at Kestrel Row Cycles earns £2,400 a month. He agrees to sacrifice £120 a month, and the shop pays it into his pension. The rates in this room are made up for practice.
You work out a figure.
You sort items into the right place and tick every answer that applies.